Accumulation/Distribution Metals Analysis & Accumulation/Distribution Trading Signals

Developed by Marc Chaikin

This metals indicator is used to assess the cumulative flow of money into and out of metals.

Originally used for metal trading, when it comes to metal trading "volume" is the amount of shares traded in a particular metals, this volume is a direct reflection of the money that is coming into and out of a metals.

The basic principle behind AD is that volume(or money flow) is a leading indicator of the metals price. (Volume precedes metals price).

Tick volume is the measure of metals price changes (ticks) received by a broker during a particular trading period/interval. Tick volume is incorporated by many metals brokers in their charting software.

Interpretation

This volume indicator is used to determine if volume is increasing or decreasing as the metals price on a metals chart is rising or falling.

UpMetals Trading Trend

If the metals price on a metals chart is rising then the Accumulation/Distribution should also be rising. This shows that the metals price move is being supported by volumes and the move upwards has strength and is sustainable.

If on the other hand metals price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between metals price and indicator & warns of a possible move in opposite direction.

DownMetal Trading Trend

If the metals price on a metals chart is falling then the AD should also be falling. This shows that the metals price move is being supported by volumes and the move downwards has strength behind it.

If on the other hand metals price is moving down and the volumes are not, the strength behind the move is reducing; this creates divergence between metals price and AD and warns of a possible move in opposite direction.

Metals Trading Analysis & Generating Trading Signals

Below is an example of a metals chart and the technical analysis explanation

From the metals trading chart above we can separate the metals trading chart into three parts, part A, B and C.

A - Upward metals trendline on chart as well as on the Accumulation/Distribution

B - Downward metals trendline on chart as well as on the Accumulation/Distribution

C - Upward metals trendline on chart as well as on the Accumulation/Distribution

As long as the metals price & the indicator are moving in the same direction then the metals price move has enough momentum to continue moving in that direction as shown above

Metal Trend Line Break

From the above chart we can see that once the metals trend line on the AD was broken then the metals price metals trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the metals trend lines were broken, both on the metals price chart and the indicator.

Comparing the metals trend lines on the indicator & the metals price those of the AD were broken before those of the chart. This is because volume always precedes metals price.

Trading Signals

Exit

Exit trading signals are generated when the metals trend line on the Accumulation/Distribution is broken. A metals trend-line break on the indicator warns of a possible reversal.

Entry

Once the metals trend line on the AD is broken it warns of a possible reversal in the direction of the market.

However if we want to take a trade in the opposite direction it is always best to wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator & the metals price breaks both their metals trend lines.

Entry Signal Generated by Metals Trend Reversal